Poland: Bitcoin derivatives are financial instruments, Bitcoin isn’t currency

Update – There has been some confusion about what exactly was issued by Poland’s Ministry of Finance and the status of

Update – There has been some confusion about what exactly was issued by Poland’s Ministry of Finance and the status of bitcoins as reported in the media. Following is a summary:

In 2013, a letter from Deputy Finance Minister Wojciech Kowalczyk to government stated that bitcoins aren’t a currency and that the ministry wasn’t aware of any derivatives based on it. Recently, Michał Pacholski, a member of the Lower House, Sejm, sent a letter to the ministry for clarification about bitcoins. Kowalczyk responds that the ministry continues not to view bitcoins as a currency. However if derivatives such as options or futures were created based on bitcoin’s value, they would have the status of  financial instruments and fall under the jurisdiction of existing laws governing derivatives. Bitcoins themselves, however, aren’t viewed by the ministry as a financial instrument. Therefore, the purchase of bitcoins or transactions performed with them remain out of their jurisdiction.

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Coindesk reports that Poland’s deputy finance minister Wojciech Kowalczyk issued a document indicating that bitcoin-based derivatives are considered financial instruments, in accordance with existing laws on financial instruments.

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Previously, the government sought to clarify the status of both Bitcoin and its derivatives. On Bitcoin itself, an analysis concluded that it is not recognized as an official currency because it doesn’t fit the definition of either local currency or foreign currency. It also previously confirmed that it is not illegal to use bitcoins, even though they’re not considered currency.

In considering bitcoin derivatives as financial instruments, the document reportedly confirms that they can be made available to Polish investors. Such a notion would seem quite novel. The next question is: hypothetically, would the government allow the offering of derivatives even based on highly obscure or nonsensical underlying assets? Is Bitcoin acceptable because it has attained pseudo-currency/commodity status around the world, or do underlying scenarios such as World Cup scores equally qualify?

Another consideration: it’s one thing to allow its sale to investors, but it’s another to grant them the full investor protection traditionally available with conventional derivatives.

In March, the Commodity Futures Trading Commission (CFTC) said that it is looking into whether they would have jurisdiction over such derivatives. In May, Belgium’s Financial Markets and Services Authority (FMSA) prohibited such derivatives, effective July 1. Such derivatives would amplify the existing volatility found in virtual currency markets to a level far too risky for investors.

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